States and local governments are doing a better job of making required annual contributions, according to an issue brief from the National Association of State Retirement Administrators.
"We are seeing widespread improvements in efforts to fund pension plans," NASRA Research Director Keith Brainard said in an interview.
"You see this really across-the-board effort. I think what we are seeing is a cultural shift in making contributions," said Mr. Brainard, who attributes that in part to more attention being paid to making required payments and a stigma on the states not doing so. "By and large we are seeing a real response. The movement is unmistakable," he said.
In fiscal 2017, the median actuarially determined contribution received was 100%, ranging from 38.4% to 174%.
The average on a dollar-weighted basis was 94%, up from 92% in the previous year. It was the fifth consecutive year of improvement and the third consecutive year where the combined average was above 90%.
However, the pace at which required contributions increased was slower, a trend in recent years connected to pension plans reducing their investment return assumptions, improving mortality assumptions and more aggressive amortization periods, all of which can increase costs.
Another factor contributing to slower rates of increase were pension reforms enacted in every state since 2009 that included higher employee contributions and lower benefit levels, the issue brief said.
"Even in the face of those headwinds, we see a real effort to pay" annual required contributions, Mr. Brainard said.
Pension costs also continued to grow at a slower pace, accounting for less than 5% of all state and local government spending, according to a 2019 NASRA report.
